Southwest Marine, a business that repairs and maintains marine vessels, appealed a district court decision that it had violated the Clean Water Act (CWA)[1] by failing to implement adequately its pollution prevention and monitoring plans as required by its National Pollution Discharge Elimination System (NPDES) permit. On its first appeal, Southwest Marine argued that: 1) the Natural Resources Defense Council (NRDC) lacked standing, 2) NRDC's notice letter was inadequate, 3) the district court erred in finding that Southwest Marine had committed ongoing violations of its NPDES permit, 4) the district court abused its discretion in fashioning the injunctive relief, and 5) the district court abused its discretion by imposing an excessive civil penalty. The Ninth Circuit resolved all the issues in favor of NRDC and affirmed the district court's judgment of injunctive relief and civil penalties.[2] While the first appeal was pending, the district court made two modifications to its original injunction. Southwest Marine also appealed that decision, arguing that the district court lacked jurisdiction to make modifications while an appeal was pending, and that the district court abused its discretion in fashioning the modifications. The Ninth Circuit rejected these arguments and affirmed the district court's modified injunction.[3]

Southwest Marine operates a shipyard on San Diego Bay that produces large amounts of pollutants, including paint chips and abrasive grit generated while repainting ships. Due to storm water runoff, tidal action, leaks, spills, and over spray, those pollutants are discharged into the Bay. As a result, Southwest Marine applied for and obtained an NPDES permit in 1983 and in 1992, obtained coverage under a general industrial permit for storm water discharges. The permits required Southwest Marine to develop and implement a Storm Water Pollution Prevention Plan (SWPPP) and a Storm Water Pollution Monitoring Plan (Monitoring Plan). Its 1992 SWPPP included requirements to perform daily inspections to ensure compliance with its plans and to keep records of those inspections. In April 1996, NRDC sent Southwest Marine a sixty-day notice letter[4] alleging violations of the CWA. After the sixty days had passed, NRDC filed suit. Four days prior to NRDC filing its complaint, Southwest Marine had submitted a revised SWPPP and monitoring plan that addressed the problems described in NRDC's notice letter.

After denying Southwest Marine's motions to dismiss[5] and for summary judgment,[6] the district court held a bench trial in late 1998. Following the bench trial, in March 1999, the district court ruled in favor of NRDC and imposed injunctive relief and a civil penalty of $799,000. In March 2000, while Southwest Marine's initial appeal was pending and after considering additional evidence, the district court issued its final ruling. This ruling made two modifications to the injunctive relief: The district court 1) required Southwest Marine to test the water's surface "microlayer" instead of "at the surface" and 2) imposed an eighteen-month deadline for compliance with the injunction, which replaced the term "reasonably expeditious."[7] On its first appeal, Southwest Marine challenged the district court's 1999 rulings on NRDC's standing, the adequacy of the notice letter, the presence of ongoing violations, the terms of the injunctive relief, and the amount of the civil penalty. In a separate appeal, Southwest Marine challenged the district court's March 2000 modifications of the injunction.

In the initial appeal, the Ninth Circuit first held that NRDC satisfied the Article III standing requirements of injury-in-fact, causation, and redressability. Plaintiff's members testified that they used San Diego Bay near Southwest Marine's shipyard for recreational and aesthetic uses, and their use of the Bay had declined because of their concerns about pollution and contaminated fish. NRDC also produced evidence that Southwest Marine's leasehold contained concentrations of pollutants of the type that Southwest Marine discharged, and that the leasehold was "devoid of life." This evidence demonstrated that NRDC's injury was "fairly traceable" to the conduct of Southwest Marine.

Second, the Ninth Circuit determined that NRDC's notice letter was sufficiently specific to inform Southwest Marine of the standards allegedly violated. Under the CWA, a citizen-plaintiff must provide sixty days notice before filing a complaint for the court to have subject matter jurisdiction over the action.[8] The notice letter alleged two separate violations: that Southwest Marine 1) failed to prepare adequate SWPPP and Monitoring Plans and 2) failed to adequately implement those plans. The Ninth Circuit held that the notice letter was clearly adequate as to the first allegation because the letter specified the requirements in Southwest Marine's permits and how its plans did not comply with those requirements. As to the second allegation, Southwest Marine argued that the letter failed to identify the "good housekeeping" provision in its revised SWPPP and how it had violated that provision. However, Southwest Marine did not submit the revised SWPPP until after NRDC had mailed its notice letter. Because the letter was sufficient on the date it was mailed, the court held that the district court properly exercised jurisdiction over the "good housekeeping" claims. The Ninth Circuit also rejected the argument that, in light of Southwest Marine's post-notice alterations of its plans and facilities, a new notice letter would be required to discuss the new plan and its implementation. The court determined that subject matter jurisdiction is established by notice that is adequate on the date it is given to a defendant. Although pre-complaint actions on the part of the defendant that seek to remedy violations alleged in the notice letter may affect standing, the presence of ongoing violations, or mootness, these actions "do not retroactively divest a district court of [subject matter] jurisdiction."[9]

Third, the Ninth Circuit held that the district court did not err in finding that NRDC had in good faith alleged ongoing violations and proved those violations at trial. The CWA requires, as a threshold for jurisdiction, that citizen-plaintiffs allege in good faith that the defendant's violations are ongoing. Once at trial, a citizen-plaintiff must prove that the violations in fact are ongoing, either by showing that the violations have occurred after the complaint was filed or by showing evidence "from which a reasonable trier of fact could find a continuing likelihood . . . of intermittent or sporadic violations."[10] On appeal, Southwest Marine raised three arguments challenging the district court's finding of ongoing violations. First, Southwest Marine argued that the district court erred in finding that it had violated any conditions of its permit. The district court found that Southwest Marine had failed to make or keep records of the required daily inspections of its facility. The records that were available showed that Southwest Marine was not uniformly meeting its "good housekeeping" requirements and that this failure to implement its plans led to discharges into the Bay. The Ninth Circuit held that the district court did not err in determining that Southwest Marine had violated its permit.[11] Second, Southwest Marine argued that it was error for the district court to find that these instances of inadequate implementation constituted ongoing violations. The district court found evidence of "poor housekeeping" after the complaint was filed and these instances "present[ed] a picture of overall inadequac[y]."[12] The Ninth Circuit determined that there was sufficient evidence in the record to support the district court's finding of continuous violations. Third, Southwest Marine argued that the Ninth Circuit should remand the case for the district court to further explain its decision. The Ninth Circuit concluded that remand was not necessary or appropriate.

The Ninth Circuit next held that the district court's injunction was not an abuse of discretion. Southwest Marine argued that the district court overrode the existing permits by imposing requirements not contained in Southwest Marine's permits or plans. Under the CWA, a district court's equitable powers "are limited to enforcing standards, limitations, and orders that have been violated."[13] The Ninth Circuit concluded that the district court's injunctive measures "all [were] consistent with, and complimentary to, existing permit requirements."[14] Contrary to Southwest Marine's argument, the Ninth Circuit held that a district court's equitable measures are not limited to merely ordering compliance with existing requirements: "So long as the district court's equitable measures are reasonably calculated to 'remedy an established wrong,' they are not an abuse of discretion."[15] In short, the Ninth Circuit determined that the district court had made findings and balanced the equities adequately to support its injunction.

Finally, Southwest Marine argued that the district court had abused its discretion in setting the amount of the civil penalty because it was excessive and unreasonable. The Ninth Circuit disagreed. A district court has broad discretion to set civil penalties within maximum limits, taking into account several factors.[16] Here, the district court found that Southwest Marine had been in violation of its permit for 799 days and after considering the appropriate factors, imposed a penalty of $1,000 per day, offset by costs to Southwest Marine to comply with the injunction. Southwest Marine anticipated that the expense of complying with the injunction would exceed the penalty, thus effectively reducing the penalty to zero. Under the circumstances, the Ninth Circuit determined that the penalty was not excessive.

In its second appeal, Southwest Marine argued that the district court lacked jurisdiction to modify the injunction while the first appeal was pending, and that the district court abused its discretion in making the modifications. The Ninth Circuit disagreed with both arguments. First, the court held that the district court had jurisdiction to modify the injunction because the "changes preserved the status quo and did not materially alter the status of the case on appeal."[17] Ordinarily, once an appeal is filed, the district court loses jurisdiction over the matters being appealed. However, the exception to this rule is that a district court retains jurisdiction while an appeal is pending in order to act to preserve the status quo.[18] The Ninth Circuit determined that in this case, both of the modifications preserved the status quo. The district court noted that the testing requirement "at the surface" was vague and sought to clarify it by defining it as the surface "microlayer," which requires testing of the film on top of the water column, the original intention of the requirement. As to the second modification, Southwest Marine complained that the "reasonably expeditious" language was vague and requested clarification from the district court. The district court obliged by providing the eighteen-month deadline. Both of these modifications were minor, and the Ninth Circuit held that neither altered the status of the first appeal because Southwest Marine challenged the injunction in its entirety; if Southwest Marine had prevailed, the modifications would effectively have been reversed, as well.

The Ninth Circuit also determined that the district court did not abuse its discretion in making the modifications. Southwest Marine argued that the modifications "impermissibly expanded the scope of the injunction by increasing its burden."[19] However, Southwest Marine failed to provide any evidence of the increased burden. Further, the court noted that Southwest Marine's purpose in objecting to the eighteen-month deadline was to delay having to construct a new facility until its appeal was decided. The court noted that when compliance with an injunction threatens to deprive a party of the benefit of a successful appeal, the proper course of action is to obtain a stay of the judgment. Because Southwest Marine was denied a stay and failed to show evidence of an increased burden, the Ninth Circuit concluded that the district court did not abuse its discretion in procedure or substance. Thus, on both appeals, the Ninth Circuit affirmed the district court's judgment in its entirety.